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Not one they organise themselves. For the big one that’s footie, and for the small it’s got something to do with outer space and ninja skills with bananas.

I mean a game the teachers organize. It involves the four edges of the playground representing places or positions. It might be North, South, East, West or some other grouping. When the teacher shouts out a place, all the kids have to run that way.

It’s more complicated than that, and I don’t know all the rules, but that not important. What is important is that the game is all about learning to listen to specific instructions, maybe increasingly detailed, and in an increasingly competitive environment as some kids lose out and have to go and sit down somewhere. Sanctions or exclusions for not obeying quickly and correctly are part of the game, and the winner is the one who’s best at meticulous and prompt obedience.

I think Phillip Blond may have seen the game too, and got on to Cameron about it being the best way to keep the proles under control.

In the Blond/Cameron version, the country is the playground, and the proles rush up and down it according to the increasingly detailed instructions. Some fall out of the game because they can’t cope with the instructions, and the game becomes increasingly fraught as people chase the few winner positions.

The five basic code-named calls from Cameron and his disciplinary assistant are as follows:

IDS: Run down south where all the jobs are, leaving behind all your family and friends.

House : Run back up north, because we’re cutting your Local Housing Allowance in places where it’s more expensive to live, and you really should have thought about that before moving.

Big Soc: Run back to wherever you came from last time, or maybe the time before, and join a compulsory neighbourhood assosication to protect yourselves from all the bloody ‘migrants’ who followed the IDS call. This bit can get violent if you’ve been punished earlier in the game.

Osbo: Run back up north or maybe south this time to look after your family, who should be really important to you and who now necessarily face an uncertain future what with all the cuts to essential welfare services and are a bit more likely to die quicker

Jail: Proceed directly to jail for failing in the game and not having a job, or anywhere to live. (If you’re a pregnant teenager, the relevant call is not ‘jail’ but Tom Harris in honour one of the inventors of the game’s original version.)

In my last piece, I said that fiscal deficits as a problem are a convenient fiction for the right, and that it is perfectly logical for a country with its own sovereign currency to have as high a deficit as is needed to guarantee full employment.

Now, I could just ask them to read the links I’ve already provided which cover this (see below), but he’s right that I should try and summarize the issue myself as I don’t think I’ve ever put it in my own words.

So if you’re sitting comfortably…..let’s do brief fundamentals.

Two basics we’ll take as read.

1) What is inflation? It’s ongoing price rises. In general, no-one minds a bit of inflation; its just a fact of 20th/21st century life, so lets assume that Barney’s issue is around the threat of ‘rampant inflation’.

Now, what causes demand to outstrip supply to create rampant inflation? Well, mostly it’s when supply is constrained in some way.

Why was there huge inflation in Weimar Germany? Not because the government printed money, but because production in the Ruhr suddenly collapsed when the French and Belgian armies took over the area, after the Germans defaulted on the massively punitive reparations payments, and production collapsed.

What drove inflation in the mid-1970s? Not governments printing money, but the OPEC cartel suddenly whacking up the price of oil barrel, with all the knock on effects of that. Why did inflation stabilize? Not because of monetarism, but because natural gas came on stream and forced down the price of oil.

Why was there hyperinflation in Zimbabwe? Not because the government printed dollars, but because production on both farms and industry collapsed.

The important thing is the causality. ‘Just printing money’ is a reaction to a screwed demand/supply balance. If money had not just been printed, in Zimbabwe, more people would have starved.

That’s the first conceptual leap we need to make.

The second one is about tax.

If we can ‘just print money’, why do we need tax at all? We need it because it is both what drives production of everything, and because it regulates aggregate demand.

Governments do not need tax in order to create money for themselves to spend. They do not need to do that. They have the power to create money by making coins, printing notes or changing numbers on a computer.

As Mosler says:

Taxes aren’t about money to spend, they are about regulating our spending power to make sure we don’t have too much and cause inflation, or too little which causes unemployment and recessions.

Taxation (taking money out of circulation) is the way to curb inflation by decreasing supply at one point in the cycle, and deficit spending is the way of increasing supply at the other point. That’s how to manage a market economy with near full employment and optimum use of resources. Monetarist methods (interest rate manipulation) are a side show.

Why do people not get this?

Well, it’s a conceptual leap for people used to thinking in terms of household and /or business budgets, where revenue DOES need to be lower than spend if you’re not to default eventually.

The leap that needs to be made is based on the understanding that the state has total ultimate control over the money supply. The creation of money has been privatized and the authority handed over to bankers, who have used that freedom to create credit from thin air to become very wealthy, but who have the ultimate backstop of the state when it goes wrong.

That is, it is not in the interests of financial capitalism for us to understand what money and taxation really is. It is in their interests for us to believe in the myth that a state must ‘balance its books’, even though this leads states to ignore the needs of its citizens for fear of a mythical default position.

This myth has been reinforced recently, and shamelessly exploited by the Coalition by the plight of the Eurozone countries, who have given up control of their sovereign currency, but who currently operate without a sovereign bank. This can be resolved by the creation of a:

supranational fiscal authority similar to the U.S. Treasury that is able to spend like a sovereign government (Randall Wray).

This is the single biggest problem with the EU; it is institutionally locked into neoliberalism, whatever the politics of national governments. The Maastricht treaty sets out limits to deficit spending, which do not allow for responsible fiscal policy in times of recession, or to avoid recessions.

This is a short as I can make it. Much better, fuller accounts are here (Bill Mitchell), here (Warren Mosler) and here (Randall Wray).

As the Globe and Mail reported 562 arrests of those protesting the summit, the G20 leaders released their final communique. It represented a victory for those like Merkel and Cameron who were pressing for deficit reduction to be the key aim. The final communique stated:

Sound fiscal finances are essential to sustain recovery, provide flexibility to respond to new shocks, ensure the capacity to meet the challenges o aging populations, and avoid leaving future generations with a legacy of deficits and debt. The path of adjustment must be carefully calibrated to sustain the recovery in private demand. There is a risk that synchronized fiscal adjustment across several major economies could adversely impact the recover. There is also a risk that the failure to implement consolidation where necessary would undermine confidence and hamper growth. Reflecting this balance, advanced economies have committed to fiscal plans that will a least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016.

We see the opposing views of Europe, China and the USA in this summary. Presumably Chinese and US pressure led to the

There is a risk that synchronized fiscal adjustment across several major economies could adversely impact the recover.

Whereas the European right seems to have won the conclusion

There is also a risk that the failure to implement consolidation where necessary would undermine confidence and hamper growth. Reflecting this balance, advanced economies have committed to fiscal plans that will a least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016.

How achievable are these aims?
Can they half deficits by 2013?

When considering individual economies there is always the possibility of reducing deficits by exporting more, but for the whole world this does not apply. How can the whole world reduce deficits in the midst of a recession?

It can only do it if the private sector as a whole, world wide, saves less. And how can this happen?

The most obvious solution — to sharply raise taxes leaving the wealthy of the world with less money to save — seems to have few advocates, so we are left with three other courses of action.

The most likely initial scenario, the budget cuts of Cameron, Merkel etc plunge the economy of Europe at least into a much deeper recession as a result of which millions of newly unemployed stop making payments into pension schemes and bring down the level of saving.

The next alternative is that private firms start borrowing on a large scale to finance new investment. This is not impossible, but is unlikely until the private commercial sector has improved its liquidity.Companies have to go through a period of saving to do this. The savings of the private sector must balance state borrowing, so what is happening is that firms are offloading their debt onto the state as the borrower of last resort. Once they have shifted enough debt onto the state, and if world demand looks buoyant, they might then start borrowing to invest again. But this requires governments across the world to go on borrowing until private investment picks up. If they immediately start to try and cut the rate of borrowing and even try to run down the total level of outstanding debt by 2016, as the communique states, the whole process stalls. The communique implies that the private sector is to become a net-borrower from the state sector by 2016 — an extraordinary unlikely prospect.

The one plausible and progressive mechanism mentioned is to expand demand in the surplus economies.

Surplus economies will undertake reforms to reduce their reliance on the external demand and focus more on domestic sources of growth. This will help strengthen their resilience to external shocks and promote more stable growth. To do this, advanced surplus economies will focus on structural reforms that support increased domestic demand. Emerging surplus economies will undertake reforms tailored to country circumstances to:
• Strengthen social safety nets (such as public health care and pension plans), corporate governance and financial market development to help reduce precautionary savings and stimulate private spending;
• Increase infrastructure spending to help boost productive capacity and reduce supply bottlenecks; and
• Enhance exchange rate flexibility to reflect underlying economic fundamentals.

There is blatant hypocrisy here. Surplus economies are supposed to be expanding domestic demand, but Merkel, the head of Germany with the 3rd largest trade surplus is determined to retrench rather than step up domestic demand. In effect the pressure on surplus countries is addressed exclusively to China. There is no doubt that were China to put in place really large scale social democratic reforms, then domestic demand there would rise, with significant expansionary implications for the whole world. But for now, China’s trade surplus continues to grow, contra the declarations of the the communique. The sorts of changes that the communique asks for in China actually require a change in the political balances of forces towards the working classes in China. The fact that Hu Jintao was willing to allow even this much to go into the communique, along with the successes of the recent strike wave in China, indicates that this internal change may be beginning to happen.

If councils believe that many of the people in their area will have better life chances elsewhere, they should be allowed to assist in national job searches.

They could identify areas that are either short of labour in general, or of particular types of labour, and invite firms from those areas to visit them for job fairs. They could fund visits to other places, so that local people could get a better sense of what opportunities are available elsewhere. Such places could be within easy commuting distance, or further afield, that would imply migration.

Sunderland could offer free metro passes to people taking up work or looking for work in Newcastle. Easington could offer people help in relocating to Eastleigh. (p52).

Mr Duncan Smith, the MP for Lord Tebbit’s former parliamentary seat of Chingford, disclosed that ministers were drawing up plans to encourage jobless people living in council houses to move out of unemployment black spots to homes in other areas, perhaps hundreds of miles away…..

“We have to look at how we get that portability, so that people can be more flexible, can look for work, can take the risk to do it.”

It is understood that the Coalition is looking at ways to provide incentives for workers to move to areas where there are jobs…

But as well as incentives, there will be tough action to cut welfare bills which may prove controversial. Mr Duncan Smith, who is responsible for finding £11 billion of the extra £32 billion in savings earmarked by the Chancellor, disclosed details of moves to tackle “under occupation” of large council homes….

Is moving people hundreds of people miles in search of work, under threat of homelessness, ‘barmy rubbish’ now, Cameron?

I refer to my earlier post (no 1 in this series of five, if I get round to them all).

So if, as I said in part 1, demonstrating on a mass scale, and defending the public sector ideal, are not effective as resistance, what should we do?

First (and the subject of this post) the broad argument about why cuts are simply not necessary needs to be developed.

Yes, I know this sounds like it’s drifting straight back into the ‘this isn’t really action at all’ vacuity that I started off by criticising in part 1, but it does remain important that the more specific actions I’ll come to are ‘offered’ within the framework of a political economy argument that is wholly different from the half-baked one the mainstream left is currently offering, and thereby stands a better chance of being seen as different by the public.

This is not just about claiming the right language to set out our case, as analysed well by Paul Sagar. That’s important, but more important is the materiality of that argument.

Essentially, we need to escape the constraints of pro-capitalist (and pre-financial capitalism) Keynesianism. We need to challenge the fundamentals of the right’s argument about the need to cut spending.

At the moment, all the mainstream left appears able to do is to say that we should cut less now because it will threaten economic recovery, while accepting that we need to reduce the deficit over time.

The main focus at the moment is on how unemployment will rise if demand is taken out of the economy too quickly, rather than on challenging why demand needs to be taken out of the economy at all, and why we should tolerate any unemployment at all (for those who want to work).

This Keynesian standard is credible enough in itself, but what the mainstream left is currently therefore offering by using it is just a different timetable for cuts and retrenchment of the state. No wonder the public aren’t buying that argument; it just seems weak when compared to the Coalition’s narrative of determination to ‘sort out’ Labour’s ‘disastrous’ management of the economy. Yes, the left knows that’s crap, but that doesn’t mean it’s not selling very well.

Fortunately, there is a ready made alternative economic model for the left to sell. It comes in easy to understand chunks of meaty goodness, and it’s utterly, utterly different from the fare being offered by Cameron and Co, because it comes without any cuts at all.

The model repudiates the whole notion that fiscal deficit is bad, on the basis that a sovereign state with its own currency simply has no fiscal limits; it only has resource limits. It repudiates the ‘commonsense’ notion that running a country is like running a household, where revenue must always be higher than outgoings.

It does so clearly, and it does so convincingly for anyone who you can get to listen. This is not just because the logic is simple enough, but because it is correct.

This is the clearest shortest exposition of that model (with a nice line in counter-hegemoinc discourse thrown in) that I have seen:

Responsible fiscal practice

Now at the risk of repeating myself a million times, this is the macroeconomic sequence that defines responsible fiscal policy practice. This is basic macroeconomics and the debt-deficit-hyperinflation hyperventilating neo-liberal terrorists seem unable to grasp it:

1. The sovereign government, which is not revenue-constrained because it issues the currency, has a responsibility for seeing that the workforce is fully employed.

2. Full employment means less than 2 per cent unemployment, zero underemployment and zero hidden unemployment.

3. The sovereign government can purchase any real good or service that is available for sale in the market at any time. It never has to finance this spending unlike a household which uses the currency issued by the sovereign government. The household always has to finance its spending (as do state and local governments in a federal system).

4. The non-government sector typically decides (in aggregate) to save a propoportion of the income that is flowing to it. This desire to save motivates spending decisions which result in the flow of spending being less than the income produced. If nothing else happened then firms would reduce output and income would fall (as would employment) and households would find they were unable to achieve their desired saving ratio.

5. The government sector must in this situation fill the spending gap left by the non-government sector’s decision to withdraw some spending (in relation to its income). If the government does increase its net contribution to spending (that is, run a budget deficit) up to the point that total spending now equals total income then firms will realise their planned output sales and retain current employment levels.

6. The government sector’s net position (spending minus revenue) is the mirror image of the non-government’s net position. So a government surplus is equal $-for-$, cent-for-cent to a non-government deficit and vice versa. So if the non-government sector is in surplus (a net saving position) then income adjustments will render the government sector in deficit whether it plans to be in that state or not. If income is falling in fhe face of rising saving behaviour of the non-government sector and that spending gap is not filled by government net spending then the budget deficit will rise (as income adjustments cause tax revenue to fall and welfare payments to rise). You end up with a deficit but the economy is at a much less satisfactory position than would have been the case if the government had have “financed” the non-government saving desire in the first place and kept employment levels high.

So a responsible government will attempt to maintain spending levels sufficient to fill any saving.

Other excellent expositions of the same argument are here (including useful commentary on Greece and the Eurozone), and – from the man who has done most to turn heads towards this new model (Warren B Mosler) here. A rebuttal of the immediate argument against the model – that it necessarily induces high inflation – is presented here.

This model presented by Mosler and his colleagues is not, I hasten to add, a leftwing model.

It has nothing to say about the distribution of benefits in such a model, and nothing to say about the democratic control of the state’s sovereign authority over its currency. It is simply an accurate description of the way a fiat currency works, and of the illogic that lies behind the self-imposed constraints of both monetarist and Keynesian economists (though not the post-Keynesian economist John Kenneth Galbraith).

But the technocratic features of the alternative model are, for the time being at least, arguably its biggest selling point. Leftie/green works like this from Mary Mellor (see also article here), cover a lot of the same ground around the principles of the shift from commodity currency to fiat currency, and the way in which money has essentially been privatised over the last 30 years by banks’ ability to create it (in the form of credit) from thin air, while the state remains the unwilling but compliant guarantor.

The problem is that they are necessarily a good deal less accessible than the simple descriptions of Mosler and co of money as ‘voucher’ from the state, fiscal deficit as the ONLY way to drive a tax system, and the unerring logic of the potential to use the state’s (logically unconstrained) fiscal deficit to match any demand gap at any time.

This, I contend then, is the radical (perhaps because it is actually so unradical in class power terms) economic argument that the left needs to be both shouting from the rooftops and drawing into all its sites of resistance against cuts (see further posts).

This model, which our Labour leadership candidates (link to radical post) should be scrabbling to be the first to present as their ‘vision’. For those in the Labour party it is the alternative argument that we should be demanding these leadership candidates get a handle on, and which they should be using their undoubted rhetorical skills to get over to the public.

As the real resistance to cuts does develop, this must be the clear rationale for saying ‘no cuts are necessary’, and for calling out the Coalition on their ‘there is no alternative’ narrative.

Perhaps (as an aside that I may or may not follow up in later posts) those leadership candidates might look to the tactics employed by the climate change denial lobby to first cast doubt on the ‘official’ version of economic history and practice, and then promote the ‘real’ view. The difference in this case would be that the real is actually real.

At the moment the false narrative of Conservative ‘household’ economics is winning, because the mainstream left’s narrative is both confused and too similar to the right. It does not have to be that way.

In the next section I’ll look at what ‘legalistic’ tactics might be available to the left in the battle against the cuts (and for solidarity), including how our old friend the Powers of General Competence might just be subverted for the greater good.

There are bleeding millions of words floating about the leftie blogosphere and media telling us how terrible the cuts are going to be.

There are not quite as many words, but still bleeding loads, telling us how we should resist the cuts because they are really, really bad for a) public services b) the economy.

With notable exceptions, these articles don’t tell us anything about what we might actually do.

Take this lead article, just for example, in the most recent Red Pepper (chosen simply because I am now their favourite writer and want to advertise the fact shamelessly). It’s fine in its own way, but it does go through the all too common ritual of a) giving us a headline to tell us we’re going to be told how to resist the cuts b) setting out the case against cuts c) spending a couple of paragraphs at the end telling us how important/possible it is to resist cuts.

So let’s try to move on. Let’s have a crack at taking as a given that the cuts need resisting, and then setting out how we might actually do the resisting.

This attempt to do so is, not least, further to my attendance today at Sunny’s Blognation event in London, which was exceedingly enjoyable but which, understandably enough, failed to provide its own concrete answer (or at least consensus) to its principle ‘Where now for the Left [on Political Economy]?’.

What’s to come

In the four posts to come, I’ll identify and assess four areas of potentially effective resistance work: 1) resisting the narrative of necessity; 2) resisting specific cuts 3) resisting through civil (and civic) disobedience; and 4) resisting attacks on workers.

There is an overlap here, and effectiveness will be enhanced by connecting up these areas of resistance, but for simplicity of presentation I will take them one by one.

In the rest of this introductory post, though, I’ll cover the kinds of resistance action which I think are less effective, and should be sidelined in view of their call on resources which might be devoted elsewhere.

In summary, I contend that the mainstream left should consciously sideline a) resistance by mass organised demonstration; and b) resistance by defence of the ideal of the public sector.

Resistance by mass demonstration: the time is not right

I contend that we need to accept that, at this stage at least, banner-waving demonstrations, while they may be good for the soul on occasion (I have my doubts), do not have a significant impact on the struggle against cuts.

Their organisation and conduct tends to be isolated from the rest of the resistance, taking up organisational energy and resources that might be better spent elsewhere.

More importantly, the era when they were interpreted by the ruling powers as a legitimate expression of dissent, and an overt threat of more revolutionary tactics, is long since gone.

In France, when the CGT union mobilises for one of its huge ‘manifs’ (‘demos’) in protest at plans to increase the retirement age, there is an acceptance on all sides that the scale of the turn out actually means something. The press reports in detail on the size of the demonstration in comparative terms, and the government responds in kind to dispute both number on demonstrations and percentages of the workforce on strike:

The lower turnout for the anti-retirement age rise demos in May – about half the size of March – was widely accepted as being the end of the line for the 60 years retirement concession. The threat of an increase in solidarity, and the implicit risk of the action spreading into strikes and violence were recognised as low, so the government was empowered then to act on its plans.

Nevertheless, the fact that both side measured the ‘strength of feeling’ by counting the number of demonstrators and associated strikers gives an indication of the hegemonic validity, rooted deeply in French political tradition, of the demonstration as proxy (even potent symbol) for what may come next. It remains enough to have the ruling Parisian classes discussing the potential for working class foment over a soiree au 15ème, and to ensure that the appropriate ‘coups de téléphone’ are made the next morning.

There is no such tacit agreement – to allow demonstration to stand as proxy to revolution – in Britain. We are kidding ourselves if we think that demos will spontaneously develop into wider actions, or that the government will think they might.

This is most certainly not to say that, as some kind of (ill-defined) organisational left, we should not support demonstration activity as it crops us locally at sites of resistance. The repertoire of leftwing resistance is limited, and the banner-waving demonstration is a part of it, with potential for a good deal more effect on local ‘bosses’ reporting back into their ‘superiors’ than it does at the level of nationally organised demonstration.

I remember from my own formative years of trade union militancy (I make no claim to have tactical expertise now) that a spontaneous march down Tooting High Street and the friendly hijacking of a Double Decker and its pleased and compliant driver, scared the wits out of regional union officials (we’re talking 1988 nurses’strikes here) but was an awful lot more effective both in terms of morale and effect than an ‘organised’ march might have been.

Twenty odd years on, with much less spontaneity about my person, I’d want to be the scared witless moderate organiser, taken over by the events of the day to the extent that it’s not me in court the next day. In other words I’m happy to follow Hannah Arendt’s view that violence (in its very widest sense here) does not in itself create power, but that is understandable in the context of spontaneous social movement.

Resistance by defence of the ideal of the public sector: the ideal is not right

Resistance through some kind if popular appeal to the ideal of the public sector and its servants is pointless.

Firstly, it’s often difficult to see what this kind of resistance actually entails, other than the circularity of talking about how important it is to defend the public sector.

Secondly, I agree totally with Sunny’s ‘tactical view’ that the population at large has no sympathy with the plight of the public sector because the anti-public sector argument of ‘waster’, ‘diversity officer non-jobs’ and ‘PC gone maaaad’ has been conclusively won by the right, and statements in support of the public sector in general only reinforce those prejudices. If you don’t believe it, just read the papers and – as Sunny also point out – the opinion polls.

That is not to say that specific cuts to specific services should not be resisted both on the ground and through popular appeal to the need for that service, but it is to follow Sunny’s point that much of the rhetoric from Labour in support of the public sector has been self-defeating.

This failure is, in turn, associated with the reality that the public sector as it is currently constituted is not something that the left should be defending in its entirety anyway; by all means defend worker rights, but defending an overall status quo of a public sector which remains massively managerialist and inflexible to the needs of those who need state support most is neither the right way to defend againt cuts tactically, or right in itself.

Lots of people know from personal experience that the public sector didn’t help them when they needed it – whether it was because the tick-box culture in Sure Start stigmatised them as a parent so much that they preferred to remain lonely and depressed rather than plead guilty to their lack of educational opportunity, or because their old mum did actually get crap care in hospital and died a sad and lonely death because the resources weren’t in the place alienated and bureaucratized hospital staff knew, in their heart of hearts, they should be.

The left should be defending the right of workers to militate for a better public service, not pretending that all in the garden would be rosy if the Tories and their LibDem traitor-mates weren’t in power.

I’ll see you soon for part two of this series of five, in which Ill try to answer: ‘So if demonstrating and defending the public sector ideal are not effective as resistance, what should we do?’

I have received a response to my formal complaint to the General Secretary of the Labour party about the public statements made before the general election by Frank Field MP.

I made the complaint in March 2010 and reconfirmed in May 2010 after the election. It concerned statements made by Mr Field about his willingness to work with any new Conservative government. My main contention was that in making such statements Mr Field was effectively condoning a Labour party defeat in the general election, and making plans for the period afterwards. In so doing, I suggested that he was making life for his party very difficult to campaign for him while remaining within the Labour party’s rules.

The response dismisses my complaint. It defends firstly Mr Field on the basis of his track record of interest in poverty issues; I fail to see any relevance in Mr Field’s previous record to the matter in hand.

The response then goes on to say that his work on an all-party group is acceptable, and not unusual. Finally, his public press statements are found to be acceptable. No point of comparison with other disciplinary cases involving members’ press statements was offered.

That concludes this matter for now. I have no desire to become obsessive on this single issue.

I am disappointed in the response received but believe there is a more general issue at stake around the way in which political discipline is maintained in all parts of the party, including the PLP, while leaving room for open discussion, creativity and speed of action where necessary.

This issue is best addressed by active involvement in or with the National Constitutional C0mmittee, and I will be blogging on that matter shortly.